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Thursday, May 4, 2017

Yanis Varoufakis and the Greek Debt Crisis

Memoirs of an erratic Marxist

Yanis Varoufakis once described himself as an ‘erratic Marxist’.
This heterodox economist became the finance minister in the Syriza-led
Greek government during the most intense period of the Greek debt crisis
when the Greeks were trying to avoid severe austerity measures being
imposed by the Troika of the EU group, the IMF and the ECB back in 2015
and stay in the eurozone.

Varoufakis was sacked by PM Tsipras when Tsipras decided to
capitulate to the Troika demands, despite the Greek people voting to
oppose Troika austerity in an unprecedented referendum vote called by
Tsipras himself. Since then, the Syriza government has agreed to a
succession of further fiscal austerity measures including cuts to wages
and jobs in the public sector, pension reductions and privatisations in
return for handouts by the EU in loans to repay previous debts – in a never-ending circle.

Now Varoufakis has published his memoirs
of his time as finance minister and what happened in the discussions
and negotiations with the EU leaders and others over managing Greek
public debt. According to Paul Mason, reviewing the book, “Varoufakis has written one of the greatest political memoirs of all time.”
Well, to me this stands as hyperbole compared Trotsky’s My Life or for
that matter, Churchill’s political memoirs. But no doubt the book is
interesting, as Mason puts it, as “the inside story of high politics told by an outsider.” According to Mason, Varoufakis shows graphically that “Elected
politicians have little power; Wall Street and a network of hedge
funds, billionaires and media owners have the real power, and the art of
being in politics is to recognise this as a fact of life and achieve
what you can without disrupting the system.”

Varoufakis makes the point that “not only was Greece bankrupt
in 2010 when the EU bailed it out, and that the bailout was designed to
save the French and German banks, but that Angela Merkel and Nicolas
Sarkozy knew this; and they knew it would be a disaster.” The aim
of the Euro leaders back in 2010, when the Greek crisis mushroomed in
the wake of the Great Recession and the global financial crash was to
ensure that the German and French banks did not suffer severe losses
from any default by the Greek. These banks had bought huge amounts of
Greek public debt to make profits and now in the crisis Greek bonds were
worth nothing. The EU leaders came up with a solution: the banks would
take a small ‘haircut’ (no more than 10% on their bond holdings) and
the rest of the debt would be shifted onto the books of the EU, ECB and
the IMF to be paid off over the next decade or so. The Troika would
then squeeze and sweat the money they lent to pay off the banks out of
the Greek people.

Eventually, the leftist Syriza won a famous victory in the Greek
election on a programme of rejecting the debt burden and refusing
austerity measures. This is what I wrote at that time: “The
alternative to grasp the nettle: demand the cancellation of the euro
and IMF loans (the original demand of Syriza) or default; impose capital
controls, take over the Greek banks and appeal to the Greek people for
support and the European labour movement. Let the Euro leaders make the
move on Eurozone membership, not Syriza. The problem is that now the
Greek people have been led to believe that there is only one way out: a
deal with the Eurogroup on increasingly bad terms. The alternative of a
socialist plan for investment and a Europe-wide appeal is not before
them.”

After months of negotiations with the Euro leaders, Tsipras called a
referendum to refuse any austerity deal, expecting to lose the vote (as
did Varoufakis apparently). Losing the vote would have got Tsipras off
the hook as he could have agreed to the Troika measures because the
Greeks accepted them. But he and Varoufakis got a shock. Despite a
massive media campaign by the Euro leaders and conservative forces
within Greece; despite the Germans and ECB forcing a credit squeeze and a
run on and closure of Greek banks for weeks, the Greek people said no.

Nevertheless, Tsipras decided to ignore that vote and opted to capitulate. Mason says this was the right thing to do. “I
continue to believe Tsipras was right to climb down in the face of the
EU’s ultimatum…. For Tsipras – and for the older generation of former
detainees and torture victims who rebuilt the Greek left after 1974 –
staying in power as a dented shield against austerity was preferable to
handing power back to a bunch of political mafiosi backed by a mob of
baying rich-kid fashionistas.” Is Mason serious? Was the
right-wing Mafiosi the only alternative? Instead of building a movement
of support for the government and proposing an emergency plan for the
Greek people and its economy, the best solution was to give in?

Back in July 2015, I considered the options for Syriza.
There was the neoliberal solution being demanded by the Troika. This
was to keep cutting back the public sector and its costs, to keep labour
incomes down and to make pensioners and others pay more. This was aimed
at raising the profitability of Greek capital and with extra foreign
investment, restore the economy. Then maybe the Eurozone economy would
eventually start to grow strongly and so help Greece, as a rising tide
raises all boats.

The next solution was the Keynesian one, advocated by the left-wing
within Syriza (but not by Varoufakis, who remained silent and left for
America – apparently because of death threats to his family, according
to his memoirs). This meant boosting public spending to increase demand,
cancelling part of the government debt and for Greece to leave the euro
and introduce a new currency (drachma) to be devalued by as much as was
necessary to make Greek industry competitive in world markets.

The trouble with this solution was that it assumed Greek capital
could revive with a lower currency rate and that more public spending
would increase ‘demand’ without further lowering profitability. But the
profitability of capital is key to recovery under a capitalist economy.
Greek exporters may have benefited from a devalued currency, but many
Greek companies that earn money at home in drachma would be decimated.
And rapidly rising inflation that would have followed devaluation would
only raise profitability precisely because it will eat into the real
incomes of the majority as wages failed to match inflation. Indeed, that
is what is happening since the Brexit vote in the UK.

The third option was a socialist one – something not adopted then by
either Tspiras, Varoufakis or the Syriza left (or it seems, could ever
be viable, according to Mason). This recognised that Greek capitalism
would not recover to restore living standards for the majority, whether
inside the euro in a Troika programme or outside with its own currency
and with no Eurozone support. The socialist solution would be to replace
Greek capitalism with a planned economy where the Greek banks and major
companies are publicly owned and controlled and the drive for profit is
replaced with the drive for efficiency, investment and growth. The
Greek economy is small but it is not without an educated people and many
skills and some resources beyond tourism. Using its human capital in a
planned and innovative way, it could grow. But being small, it would
need, like all small economies, the help and cooperation of the rest of
Europe.

This solution would have required Syriza mobilising the latent
support of the people through workplace committees to discuss an
emergency plan for change. It would have entailed immediate
nationalisation of the major banks to ensure payment of people’s
deposits (despite the ECB) and the takeover of the major companies
(reversing privatisations) in order to institute a plan for production
and investment. That would have meant approaching the labour movement
and progressive forces within the major EU countries to force their
governments to stop austerity on Greece or make it leave the euro and
instead relieve them of this ‘odious debt’ just
as the Germans were in the 1950s relieved of their reparation debt
(still not paid to Greece for the destruction and death by the Nazis).

This socialist option was the only one that would have got Greece out
of its hell. But of course, it would be hugely difficult to
implement. Yes, the conservative forces within Greece would mobilise;
yes, the Greek military may rear its head; and yes, the Euro leaders
would try to strangle a tiny socialist Greece and kick it out of the
euro and EU. But the battle for a socialist transformation always poses
these sorts of obstacles; and only the unity of the class across Europe
and a determined Greek leadership could have overcome them. But the
Syriza leaders, including Varoufakis (the erratic Marxist), never
considered this option as viable, and Marxist Paul Mason agrees with
them.

For them, there was no alternative but to accept the Troika
impositions – which have continued to this day. And Mason admits that “Tsipras’s government has proved a not very effective shield for the Greek working class” even if (as he claims) it was
“an effective protection for the million-plus Syrian migrants who
landed on Greek shores in the weeks following the economic surrender.”

Mason reckons Tsipras’ achievement of building Syriza and getting it
into government is greater than that of maverick ‘Marxist’ Varoufakis
who kept ‘clean’ from the capitulation in July 2015. But apparently if
the ‘global left’ is recover than it “needs leaders like Tsipras and to find thinkers and doers like Varoufakis, and to nurture them.” Well,
Varoufakis’ memoirs and Tsipras’ actions hardly seem to justify Mason’s
admiration. Only this week, the Syriza-led Greek government signed up
to another round of severe austerity measures in order to get the next
tranche of so-called bailout funds from the EU. The government agreed
to adopt another €3.6bn ($3.8bn) in cuts in 2019 and 2020 and have
conceded fresh pension (9% cut) and corporate tax breaks in return for
permission to spend an equivalent sum on poverty relief measures.

The Syriza government has done everything it has been asked of by the
Troika in making the Greek people pay for the failure of Greek
capitalism. And yet the EU leaders have still not agreed to ‘debt
relief’. Indeed, they are talking of only considering it once the
austerity measures in the latest bailout have been implemented in full
and the programme comes to an end in 2018. In the meantime, the Greek
government is supposed to run a budget surplus (before interest payments
on loans) of 3.5% of GDP a year for the foreseeable future. That is a
level way higher than any other country in the EU and way higher for so
long than any other government has achieved ever!

No wonder the IMF considers this approach as unsustainable. “Even
if Greece, through a heroic effort, could temporarily reach a surplus
close to 3.5% of GDP, few countries have managed to reach and sustain
such high levels of primary balances for a decade or more, and it is
highly unlikely that Greece can do so considering its still weak policy
making institutions and projections suggesting that unemployment will
remain at double digits for several decades.” IMF.

For Greece, there is no escape from the penury of public debt owed to the IMF and Eurogroup. There is a new and detailed study of the plans
of the Troika (EU, ECB and IMF) to force the Greek government to run a
primary (excluding interest payments) budget surplus of 3.5% of GDP from
2018 onwards. It shows that it will be impossible for Greece to
deliver this level of austerity and, even if it did, it would not stop
the debt burden rising even more. “Past experience suggests the
fiscal policy expected – a budget surplus before interest payments worth
3.5 per cent of GDP, sustained for 16 years — has literally no chance
of happening even if Greece were able to start generating a 3.5 per cent
primary surplus by 2018, as per the targeted schedule”. It goes on:
“Greece’s debts to the EFSF would more than double to about €278 billion
in 2050, when interest deferral is assumed to end, and then begin a
slow decline, but the outstanding amount in 2080 would still be higher
than it is today.” That’s 70 years since the crisis began! The paper says that the EU should offer more bailout money from next year to “tide Greece over”.
But the debt would remain and keep on rising, even if yet more
austerity measures (already unprecedented in fiscal history) were
applied. The only solution is to write the debt off.

So, while Varoufakis publishes his memoirs of his time as finance
minister during the debt crisis, exposes the rotten and cruel policies
of the Troika, and goes around Europe in seminars to demand a better
Europe, the Tsipras-led Syriza government continues trying to meet the
demands and targets of the Troika in the vain hope that European
capitalism will recover and grow and so allow Greeks to get some crumbs
off the table. There may eventually some deal on ‘debt relief’. But it
will still mean that Greece has an unsustainable burden of debt on its
books for generations to come, while living standards for the average
Greek household fall back below where they were before Greece joined the
Eurozone. A whole generation of Greeks will be worse off than the last
and another global recession is still to come.

1 comment:

Thank you Michael Roberts for this article. The authors of this Blog continually argue one of the main problems for the left forces in the world is the influence within them of so many of the people who call themselves "marxists." People like Varoufakis, Tsipras and Mason. These people call themselves marxists in one way or another even if "erratic" marxists. What this usually means is that they agree with Marx's criticism of capitalism. But and this is the central point. Marx did not only criticize capitalism. Marx explained that the working class was the progressive force at this time in history and only the working class could change the world. In case after case like here with the roles played these three people and in the writings of the majority of the left there is no belief that the working class can change the world. That the working class can change society. So again and again these people if they get into power sell out to capitalism. Or if they are not in power in their writings they justify the sell out. I find the role of Varoufakis particularly odious. He was in a position in the Greek government, he says he is some kind of Marxist, he knows about how capitalism and how it works. He knows that to take on capitalism you have to mobilize the working class and spread the struggle internationally. The Greek working class in the referendum referred to in the article were prepared to fight. They could have got the support of large sections of the working class throughout Europe and the world. But what did the so called left do. Tsipras just ignored the democratic decision of the Greek working class to oppose the attack of international capitalism. No whining here from the mouthpieces of imperialism about this breach of democracy. No when it suits them to ignore democratic decisions then there is no problem. Varoufakis knew his policy was not going to work. He it appears to me is just a dilettante. He left himself a way out by saying he was an "erratic Marxist." That is was only a Marxist when it suited him. Then there is Mason: Also with no belief that the working class can build a new world, he comes in and with the credibility of his criticism of capitalism behind him justifies the role of Varoukakis and it appears Tsipras. The problem of the working class and actually of human society is that it does not have a mass international leadership of tens of millions which believe that the working class can build a new world. People like these lefts Mason, Varoufakis and Tsipras are part of the problem, not part of the solution. They are so because while they criticize capitalism on occasion at no time do they believe that the working class can change the world and and at no time do they seek to build a working class movement with a leadership that is prepared to fight to overthrow capitalism. And finally so Varoufakis says he went to the US because his family were threatened. What did he think would happen if he challenged capitalism. And even more interesting think of him in relation to Assange who does not even describe himself as a marxist erratic or otherwise. He cannot flee to the US. He has to stay in the Ecuadoran embassy in London so the US cannot get its hands on him and crush him. But Varoufakis was safe in the US!!!!!!!